BEST BOOKS AND METHODOLOGIES FOR VALUE GROWTH

Corporate value growth is a key metric of success for all companies. Measuring and driving this growth holds numerous unique challenges for privately-held companies, especially in the lower middle market. Fortunately, there are resources available to assist with that process. In this article, we’ll share some of our community’s recommendations of books and methodologies for value growth:

This post is part of a series based on conversations with the XPX community about the methodologies and tools they use to support their private company clients in value growth engagements. We split their feedback into four articles:

3HAG WAY

Book Description (excerpt taken from the website): Every company needs a 3HAG—a 3 Year Highly Achievable Goal! The 3HAG WAY is a prescriptive framework that takes the guessing out of your strategy and ensures that you and your whole team are confident in where you are going. It breaks your strategy down into a clear and simple picture, allowing the whole team to see where the company is going and where it will end up in three years’ time.

THE METRONOME EFFECT

Book Description (excerpt taken from the website): "The Metronome Effect will guide you on your journey to predictable profit. It will ensure the habituation that excellence is derived from is ingrained in your organization. Every leader is empowered to set their metric beat to make sure the company is doing everything it needs to do to grow their profit."

--

About the Author:

Shannon Byrne Susko, the CEO and Founder of Metronome United, is a serial entrepreneur who has led successful company sales and received multiple business recognitions and awards. In 2014, she wrote The Metronome Effect: The Journey to Predictable Profit, which was “coined as the 'Street Version' of the best-selling book – Scaling Up (by Verne Harnish).” In 2018, she published its follow-up, 3HAG Way.

XPX Member Experience (Andrew W.):

3HAG WAY and E-Myth are a set of step-by-step processes and systems that business owners can follow. Obviously, from our (advisor) point of view, we’d only select one of these systems and approaches, but I like them because each of the books offers a set step-by-step system that you can introduce the business owner to grow their businesses and increase the value of their business.

They’re very similar, as you would expect, because these are universal principles that are enshrined within the systems and processes. That’s why I recommend those books for other advisors and consultants to have a look at and perhaps choose a system which resonates with them and which is appropriate to their particular business owner and size of the business.

THE EMYTH

Book Description (excerpt taken from the website): "We wrote the book on how to build a business that gives its owner more freedom and produces consistent, predictable results—and shaped the world of business coaching and entrepreneurship in the process. People believe businesses are started by Entrepreneurs. The truth is, most businesses are started by Technicians who think that, because they know how to do the technical work of a business, they’ll be able to build a successful business that does that work. This myth—the EMyth—is why so many businesses get stuck or eventually fail."

About the Author: Michael Gerber is a pioneer of the business coaching industry. He founded his consulting company EMyth in 1977 to help small businesses grow and be successful. After coaching companies for nine years, Gerber made his approach widely available by writing EMyth: Why Most Businesses Don’t Work and What to Do About It in 1986. The book coined the now popular methodology that business owners should be working ON the business and not just UN it. Gerber followed up with EMyth Revisited in 1995, where he addressed questions from business owners he received after writing the first edition.

XPX Member Experience (Andrew W.):

3HAG WAY and E-Myth are a set of step-by-step processes and systems that business owners can follow. Obviously, from our (advisor) point of view, we’d only select one of these systems and approaches, but I like them because each of the books offers a set step-by-step system that you can introduce the business owner to grow their businesses and increase the value of their business.

They’re very similar, as you would expect, because these are universal principles that are enshrined within the systems and processes. That’s why I recommend those books for other advisors and consultants to have a look at and perhaps choose a system which resonates with them and which is appropriate to their particular business owner and size of the business.

(The EMyth)

THE EXIT STRATEGY HANDBOOK

Book Description (excerpt taken from the website): "The BEST Guide for Selling Your Business will enable you to stand out as you exit your business. With millions of business owners looking for a way out over the next few years as we head for the Baby Boomer Tsunami™, make sure you stand out from the competition. The Exit Strategy Handbook is your guide for the best possible exit."

About the Author: Jerry Mills founded B2B CFO in 1987. He is a frequent speaker and a Certified Business Transition Expert, and has received multiple business accolades and awards on behalf of the company. Mills has written three books: The Danger Zone, Avoiding the Danger Zone, The Exit Strategy Handbook.

XPX Member Experience (Stephen N.)

The Exit Strategy Handbook is one of our guidebooks that we use in our practice. We use it in conjunction with our patented software, our exit software. The Exit Strategy Handbook is a guidebook that educates entrepreneurs, business owners about all of the different items, issues, concerns they need to understand in order to successfully navigate to a successful transition. The book, I think it’s 12 chapters, covers everything from the concept of adjusted EBITDA multiple; how companies may be evaluated; different kinds of buyers, financial, strategic and so forth.

A lot of the book really focuses on, in conjunction with the B2B CFO [software], on how the owners can help themselves by improving the value of the business in a number of ways. The exit software that we employ in conjunction with the book allows us to track the estimated valuation of the business as adjusted EBITDA is employed over a period of time, as well as adjustments to an estimated multiple as provided or recommended by an M&A firm or your business broker that may be employed as well as part of the engagement.

It’s [associated with] a very neat software tool that holds all the different members of what we call the success team, all of the different players that are involved in helping the owners succeed. They’re held accountable for their different roles with checklist so that the owner and the CFO can track the status of the engagement, who’s behind, who is on track. Again, it can keep track of the valuation of the company over the period of time engaged.

XPX Executive Director Mary A.: We have a number of members from your network, and I’ve always seen just a great affinity between your approach with this idea of a success team and the core values of XPX, which is having a diverse team that knows and trusts each other and works literally as a team. That’s a great perspective.

Stephen N: You’re exactly right. That’s why we like your organization. We look to your organization to complete the success team when we are involved in a transition engagement. About 20% of our clients across the country have engaged this specifically to prepare their business for a transition. In that process, we do use the handbook and the software.

(The Exit Strategy Handbook)

PROFIT FIRST

Book Description (excerpt taken from the website): In Profit First, Michalowicz explains how this age-old accounting formula turns great businesses into cash-eating monsters, trapping you in a day-to-day, check-to-check struggle to survive. He reveals how to flip that “Frankenstein Formula” and take profit first without compromising your business, and why the Profit First Formula of Sales – Profit = Expenses actually forces innovation, supports sustained growth and skyrockets profits. You are about to discover the step-by-step Profit First system that shows you how to radically change the financial health of your business…from your very next deposit.

About the Author: Mike Michalowicz is a business entrepreneur, a prolific business author and speaker. He wrote The Pumpkin Plan in 2012 and Profit First in 2017 based on his experiences growing and selling multiple businesses. He has also written The Toilet Paper Entrepreneur, Surge, Clock Work, and Fix This Next.

XPX Member Experience (Andrew W.):

Profit First, and Mike’s other book, Pumpkin Plan, they are more specific. They’re not complete holistic processes and systems for growing the business, but they take one aspect of the business. Profit First takes the accounting aspect for a small business and says, “Hey, look at the cost sales, cost formula in a slightly different way and start looking at sales minus profit equals expenses rather than sales minus expenses equals profit,” so that you’re going to encourage the small business owner, almost to pay themselves first and put various amounts of money in various different pots, so they don’t run out of cash, they don’t end up not paying themselves, et cetera. That’s a very specific focus.

(Profit First)

THE PUMPKIN PLAN

Book Description (excerpt taken from the website): Who would have ever thought that the key to explosive entrepreneurial success was held by pumpkin farmers? Just as almost every pumpkin farmer grows ordinary Halloween carving pumpkins, most entrepreneurs grow ordinary, unremarkable businesses. Yet by tweaking their approach in small ways, farmers can grow giant, prize-winning pumpkins that get all the attention and press coverage. In The Pumpkin Plan, Mike Michalowicz, author of the perennial “business cult classic” The Toilet Paper Entrepreneur, reveals how applying the same few simple methods farmers use to grow colossal prize-winning pumpkins can lead entrepreneurs to grow colossally successful businesses.

About the Author: same as above

XPX Member Experience (Andrew W.):

The Pumpkin Plan is again a very specific focus around growing the business through focusing on customers and identifying their core strengths, sticking to their core strengths and then basically once the business has got going, firing those rotten clients as the book says (that) take up all your time and cost and focus on the rest of the clients, the high-paying clients and really work on making sure that you really understand their needs and fulfill their needs as a way of growing, which to me makes sense.

Many small businesses sell, sell, sell, but sometimes, they collect lots of customers which really give them bad profit because it costs them so much to keep working with them. I thought that the Pumpkin Plan was another very specific thing that’s interesting to build into things like marketing plans and so on.

(The Pumpkin Plan)

--

We hope this article was helpful to you. It’s part of a series of posts about methodologies and tools advisors use to support their private company clients in value growth engagements. Here are the other articles in the series:

• How to Start the Value Conversation with Your Clients
• Automated Tools for Assessing Business Value
• Automated Tools to Support Corporate Value Growth

For more information and resources, check out our Advisor Resources section. The video of the webinar is below.